Today when the obsession with higher education, a fancy IIT, IIM or Harvard degree is on the rise, a question is often asked: is there any correlation between financial success and the weight of the CV? College degree can land someone a good job but many people still struggle managing their finances; due to the lack of financial intelligence the debt on them keeps on increasing and they never really become “Rich”. In his ever contemporary book “Rich Dad Poor Dad”, Robert Kiyosaki explains that a degree and a stable job can’t make you wealthy unless you are financially intelligent. It is the application of this knowledge that separates the Rich from the Poor.
Robert Kiyosaki draws two contrasting characters to convey his message. One being his biological father who despite being well educated and having a high paying job struggles to manage his finances. The other “Dad” is his mentor who despite not being well educated manages to accumulate great wealth by applying simple fundamentals of personal finance. This snubs the commonly held belief that high paying job and security are the pillars of financial success. But as we are going to see, it’s not your pay-check but your attitude towards money and investment that will determine your success.
The Rich DON’T Work for Money!
“ThE poor and the middle class work for money. The rich have money work for them.”
The rich dad says that he does not work for money; money works for him. He thinks that mastering the art of making money work for you is the key aspect of financial intelligence. But there are two things that prevent people from accumulating great wealth:
Fear is the primary emotion that affects our financial decisions. Fear of not being able to pay the monthly bills or having no money is something that makes people stick to their jobs. It also prevents them from making good investments.
Desire is the second one. The more we earn the more we spend. We become so obsessed with new clothes and fancy cars that even the thought of not having a job and a monthly salary makes us scared.
Don’t become a slave to your emotions. understand them, learn to control them.
Why Teach Financial Literacy?
“It’s not how much money you make.
It’s how much money you keep.”
Rich dad says that to become wealthy one must develop financial literacy. What is financial literacy? It is nothing but the art of managing one’s finances. Saving, making good investments are integral parts of this. Robert Kiyosaki has explained financial literacy by comparing some simple balance sheets of poor and the rich.
The key is to buy assets and not liabilities. The rich make judicious investments in bonds, stocks, real estate etc and the income generated from these covers the expenses. On the other hand, the poor are spending all their income to cover expenses. They don’t have any assets. Some even make it even worse by buying liabilities instead of assets.
Mind Your Own Business!
“The rich focus on their asset columns while
everyone else focuses on their income statements.”
Rich dad says that in order to be rich one must focus on developing the asset column.The rich become rich because rather than depending entirely on their salary and waiting for a rise, they make new entries in the asset column on their balance sheet. They keep their expenses low, refrain from indulging in liabilities and make profitable investments.
Kiyosaki has stressed upon one point that your profession and your business are very different. As Kiyosaki puts it, “Financial struggle is often directly the result of people working all their life for someone else. Many people will have nothing at the end of their working days.” Don’t rely on your job to become financially secure; mind your own business and acquire assets and use the income generated by them to buy more assets.
The History of Taxes and the Power of Corporations
“My rich dad just played the game smart,
and he did it through corporations—
the biggest secret of the rich.”
Rich people understand the power of corporations. They create corporations to enjoy the benefit of corporate exemptions and thus avoid the personal taxes incurred by the poor. The key thing here is to know and understand the system and finding the loopholes to your advantage. Corporations help the rich to minimize their losses to only the amount they have invested in the corporation. They pay taxes after paying for their exemptions. On the contrary, people with jobs pay taxes before they even pay for their expenses!
The point here that Kiyosaki wants to make is that the rich don’t let the system hinder their progress, rather they use it to their advantage. Having profound knowledge of law, accounting, taxes etc helps them to save their money and make better use of it.
The Rich “Invent” Money!
“Often in the real world, it’s not the smart
who get ahead, but the bold.”
This is a fundamental principle in personal finance- higher the risk better is the return. What all great investors have in common is this one quality that they are not risk averse, rather they love to take calculated risks. Many people prefer putting their money in savings account as they consider it safe. But the truth is that the return from this is not even enough to beat the inflation!
Self doubt is what comes in our way when we make investments. Most people are conservative. They wait around for luck and a suitable opportunity to arise. But the rich people can sense a money making opportunity before anyone else. It is their financial intelligence and the love for risk that helps them through. Learn to dream big and take risks and stop waiting for something that will never happen on it’s own. Go get it, create it, invent it!
Work to Learn-Don’t Work for Money
“Job security meant everything to my educated dad.
Learning meant everything to my rich dad.”
Rich people perceive money differently. They know that earning it is just a small part of the whole picture. You have to learn to manage it. Apart from the things we learn in school, we also need to become financially literate to achieve financial success. Rich people are always ready to learn. They will work in exchange of “learning” rather than “earning”.
Having good knowledge is important not just for investors but for everyone. Because the decisions we make everyday are going to affect our future- loss of money now might be helpful in making huge profits in the future if we are ready to learn.
You can visit www.richdad.com for more information about Robert kiyosaki and different products and services offered by him.
